Venture capital funding for new companies increased modestly nationwide during the first three months of this year, according to two surveys that also showed VC firms put more money into fewer deals.

In San Diego, venture investment in health care was especially strong during the first quarter, and the region's once-dominant telecommunications industry began to show faint signs of life.

"If you look at the numbers, this is the biggest quarter that San Diego has seen since the second quarter of 2001," said Donald A. Williams of Ernst & Young's San Diego office. "It was absolutely driven by the life sciences industry."

Although the two surveys showed consistent trends, their results differed because of differences in the way venture firms respond to each survey and varying methodologies used.

The MoneyTree survey reported $4.6 billion in venture capital was invested in 618 companies nationwide. That was almost 10 percent higher than the $4.2 billion invested during the same quarter last year, according to the survey prepared by PricewaterhouseCoopers, Thomson Venture Economics and the National Venture Capital Association.

A rival survey found $5.1 billion was invested in 465 companies throughout the United States. That was a 25 percent increase over the nearly $4.1 billion counted in the first quarter of 2003 by Ernst & Young and VentureOne.

Venture capital firms provide a crucial source of early funding to startup companies developing new technologies. Entrepreneurs usually offer venture investors a stake in their company to get the funds they need to commercialize their technology and expand operations.

The industry ballooned to enormous proportions as the technology bubble peaked in 2000, when nearly $106 billion was invested in more than 8,000 deals, according to the National Venture Capital Association.

A three-year decline since then has left industry experts looking for signs of a rebound, and describing a tougher business environment that has lost the irrational exuberance of the late 1990s.

"What's important to remember is that investment levels are not going to return to these outrageous numbers," said Ted Schlein of Kleiner, Perkins, Caufield & Byers in Menlo Park. "The norm is what we saw in '91, '92 and '93."

After a crash landing, in other words, the industry is looking to come back with a soft liftoff.

In San Diego, the MoneyTree survey reported a total of $284 million invested in 27 local companies in the first three months of this year, a 98 percent gain over the same quarter last year. The increase was driven largely by a surge of investments in biotech and medical science companies. Funding for life sciences amounted to $193 million, or 68 percent of the total.

The rival Ernst & Young survey counted almost $342 million in funding for 25 companies, with health care technologies accounting for almost 74 percent of the total.

"There's a lot of interest in a lot of early-stage life sciences and health companies, and we just happen to have a lot of those types of companies," said Drew Senyei, who oversees life sciences investments at Enterprise Partners Venture Capital in San Diego. "Once you get critical mass, it just feeds on itself and catalyzes further activity."

Salmedix, a biotech firm developing drugs for blood cancers, was ranked by MoneyTree as San Diego's biggest deal at $45 million.

Favrille, which filed for an initial public stock offering this month, got $44 million in first-quarter venture funding. That represents another recent trend in the market, said Ivor Royston of Forward Ventures, a San Diego venture firm backing Favrille's development of cancer vaccines.

During the exuberant late 1990s, companies often funded their balance sheet after the fact, with the proceeds of their IPOs, Royston said. Now "most of the people who invest in the public markets want to see that there's a strong balance sheet," before a company goes public.

How close a biotech company is to getting regulatory approval for its products also has become a more important factor, Royston said.

Although life science investments made a disproportionate showing in both surveys, some saw encouraging signs in the telecommunications and networking sector, which was flattened after the tech bubble popped in 2001.

The MoneyTree survey found that San Diego's LightPoint Communications got $17 million and Astute Networks got $15 million in venture funding during the quarter.

"Networking and telecom is the sector that's been hammered, which sort of makes biotech and life sciences look like the 300-pound-gorilla of our local economy," said Jim Ingraham, a partner with the San Diego office of PricewaterhouseCoopers.

After three down years, "we're seeing a resurgence in the economy in information technology spending and even in communications and networking," Ingraham said. One of the nice things about San Diego, he added, is that technology here "is sort of spread across the board."